60. Do you think that is sort of questionnaire
fatigue, or why do you think it was less?
(Mr Daykin) Yes, I think, to some extent, it was,
they thought they had answered the questions the previous year,
so why do it again.

61. You also said that the actual assessment,
the client satisfaction, had gone down a bit; what is your view
of where that was?
(Mr Daykin) I think, only very marginally, and in
some areas it went up, in some areas it went down; but I think,
again, our feeling was that the clients who were satisfied with
our service did not bother to reply the second time, and so we
were only getting a majority of replies from those who had something
that they wanted to report to us, which is important and we want
to listen to them.

62. If the new survey continues to show
low levels of response, what would you do then?
(Mr Daykin) This is part of this process, that we
are trying to develop a more flexible approach to receiving our
customers' views and to sounding out particularly the views of
the bigger customers, with whom we want to maintain a good relationship.
We have developed significantly our relationship with three of
our major customers, actually by implanting members of staff to
go and be on site in the Department for certain days of the week,
within Opra, within DWP, within the Cabinet Office, Pensions Office,
so that is responding to a customer desire to have more actuarial
advice available to them, on a more accessible basis.

63. So this is perhaps another SDA target
that needs reformulation, because, at the moment, it is very specific:
"Improve levels of client satisfaction scores, achieving
a 5 per cent improvement . . . by April 2004." If you are
going to change how you consult clients on their satisfaction,
perhaps you need to look again at that objective?
(Mr Daykin) I think the difficulty is coming up with
the right target; obviously, the objective is to improve the level
of client satisfaction, and it is a question of how we measure
that and whether you can encapsulate it in one number and one
index, or whether there are a whole number of facets to determining
that satisfaction level.

64. I do not want to put words in your mouth,
but when I worked in industry I used to be frustrated by some
of our official target-setting, and I get the sense that you are
also saying that you want to fulfil the spirit of the targets,
rather than necessarily go to the actual detailed text. Would
that be fair comment?
(Mr Daykin) I think the spirit of the targets is most
important. I think we must focus on our customer needs, and that
must be our overall aim, and we do not want to get too sidetracked
into whether we meet a particular number, if that number does
not really represent exactly what we are doing. We would like
to have targets which do reflect, as well as possible, what we
are trying to achieve and line up with our management responsibilities,
and we are trying to develop that.

65. The general problem for the Government
Departments in this area is, of course, that if they do not set
very specific targets it is actually quite difficult to work out
what is happening, whether they are getting value for money. Do
you feel the balance is not quite right yet?
(Mr Daykin) I think, our position, as I said, is somewhat
different, because we are operating specifically in a full-charging
regime, with customers who pay fees for our services and are free
to go elsewhere; so the acid test is whether they continue to
use us. And the main test, as to whether we are operating efficiently
and effectively, is that we continue to operate within the framework
set by Parliament within the Resource Accounts and the cash requirement,
and that we do get cash in to meet our outgoings and we do continue
to keep our customer base.

66. So, in your view, it would actually
be better if the objectives were set more in those terms?
(Mr Daykin) I think that would be my preference, yes,
in terms of the focus of activity.

67. One little niggle; the target quality control
is based on internal assessment, the Government did this with
its Annual Report in the first year, and it did not get universal
support for the view this was an independent view, and do you
feel that you are able to assess your own quality to everybody's
satisfaction?
(Mr Daykin) We have a peer review process within the
Department, which is essentially that work produced by one actuary
must be reviewed by another, and certainly all major reports going
out I would review; so that is part of that process of ensuring
quality. We have decided, just recently, to try to expand the
extent to which we expose ourselves to independent review, and
we are in the process of having an independent peer review carried
out on our work for the National Insurance Fund, a peer reviewer
from Canada has just been visiting us and is going to report on
the work we do, from the perspective of an outsider. So I think
that will be a helpful addition to our peer review process, which
we might expand into some other areas.

Chairman

68. Mr Daykin, may I ask just a few questions
about these documents. The Resource Accounts, you will understand,
we have only just received, so we are not as familiar with them
as you are?
(Mr Daykin) Yes.

69. The other document, which I understand
is not a finished document, is more of an annual report than a
brochure, is it?
(Mr Daykin) This is our Annual Report, which includes
the summary of the accounts; the intention is that this will be
published at the end of the month, so it is not a final published
document yet, but we thought it would be relevant to the Committee.

70. I understand that. Perhaps we could
turn to the Resource Accounts. You refer, in your Financial Review,
to your continuing problem with slow payment; why do you allow
your clients to pay so badly?
(Mr Daykin) It is not so much a question of allowing
them to, it is just that they refuse to pay, or drag their heels,
or keep coming back with more queries, and just spin out the payment.

71. Are these Whitehall Departments, or is this
local firms, or what?
(Mr Daykin) Yes, these are Government Departments;
we do not have problems generally with others.

72. These are Whitehall Departments; how
can you get round this, can you publish a league table for us,
can you name and shame them?
(Mr Daykin) We would like to move towards having specific
payment conditions laid out, within our terms of doing business
with them, and that is what we are working towards.

73. I thought Whitehall itself operated
on a 30-day rule?
(Mr Daykin) It appears not, in terms of paying other
Whitehall Departments.

74. Is this a serious problem?
(Mr Daykin) It is not an overwhelming problem, but
it is a problem for our cash flow, because we do not have any
working capital, so we do have to manage our resources within
the money that we get, effectively, month by month, and, therefore,
it can be significant to us, if people delay payment.

75. Now you also refer to the difficulties
in recruiting actuaries; would you like to comment on that? How
serious is that for you, is that undermining your work?
(Mr Daykin) It is a continual problem, because of
the market value of actuaries, and the fact that actuaries are
very much in demand. We are not suffering particularly at the
moment relative to the position we were in a few years ago; we
always struggle to get qualified actuaries, but we have got a
full complement of actuaries at the moment, and we are able to
recruit trainee actuaries, but it is a constant struggle to keep
up the number of actuaries, because, obviously, we lose some,
and then to find replacements is not easy.

76. But you do say it has had an impact
on your ability to meet all your clients' requirements?
(Mr Daykin) We could use more actuaries, and we have
a demand out there from clients to provide more services to them,
which we could meet if we were able to increase the number of
actuaries we had.

77. But can you offer them a career structure,
following the transfer to the FSA?
(Mr Daykin) I think we offer quite a reasonable career
structure within GAD, it may be not competitive with the most
lucrative jobs that are available in the private sector, but the
work we offer is very interesting and the environment is good,
and some people find it a very attractive place to work.

78. Are you finding similar difficulties,
Mr Tiner?
(Mr Tiner) Not really. We have been quite surprised
by our ability to recruit a small number of quite good actuaries,
and obviously we are a larger organisation than the GAD, so the
career progression is more easy to define; but I would say, personally,
I am very pleased with the quality of some of the actuaries that
have joined us, Mr Hewitson, you have recruited them.
(Mr Hewitson) Yes, indeed. The number of people who
have actually responded to some of our recruitment exercises has
been fairly limited, but amongst that pool of applicants we have
actually managed to find some quite good-quality candidates, I
think, that have accepted offers; and, indeed, over the last year,
I believe we have recruited around four actuaries from the private
sector to join FSA.

Mr Cousins

79. Can I ask just one question, as a follow-on
from that. The gentlemen who were transferred from the Government
Actuary's Department, they were not actuaries, were they, the
people who were responsible for the supervision?
(Mr Tiner) No. The DTI and Treasury did not know.